OVERTIME CHANGES AFFECT 7.4 MILLION BUSINESSES

OVERTIME CHANGES AFFECT 7.4 MILLION BUSINESSES 

Is your business one of the 7.4 million businesses that will be affected by the soon-to-be-released OT changes to the Fair Labor Standards Act (FLSA)? Overtime Changes Affect 7.4 Million Businesses.

The Department of Labor (DOL) estimated this number of businesses, non-profits & organizations will have to make adjustments or reclassify employees’ statuses. HR Professionals are waiting for information that is supposed to be released this week to help their business to execute this new rule. This is the funny part–OK, sarcastically funny to HR professionals–the DOL estimates that it will only take each business less than an hour to “get up to speed” on the changes. This misinformation is causing businesses to assume that the new rule is not a big change for them, so they are not preparing. While the proposed changes are well meaning, it will cost employers a lot of time and money that was not planned or budgeted.  A 113% increase at one time will affect many employers, specifically those in non-profit, small business, southern states and rural areas.

Part I Breaks down the cost and time; Part II Sheds light on FLSA changes; Part III Provides Planning Tips with Bonus Sample Letter to Provide to Affected Employees.

I. Breaking It Down

Ok, so let us look at this logically:

The DOL estimates that employers will spend $592.7 million to comply with the new overtime rule, which will take less than 1 hour for each employer to “get up to speed with the changes.”  Hmm. There is a huge disconnect here.

The department calculates that it will only take up to one hour for employers to spend $597.7 million to:

⇒ become familiar with the changes at a cost of $254.5 million

⇒ make necessary adjustments at a cost of $160.1 million

⇒ pay for managerial cost of $178.1 million

but all of this will take less than an hour for each of the 7.4 million businesses affected…..Really?

So, not only will the Business or HR department have to…..

» learn the new rules;

» make strategic decisions with executive management regarding a course of action that best suites the business and its employees;

» share the new course of action with supervisors so everyone is on the same page;

» execute the new action; update policies and procedure;

» Apply increase of salaries or changing affected employees to non-exempt status  – while maintaining documentation and procedures to avoid discrimination (Reclassifying employees and performing job analysis may be included here) The DOL estimates that employers to employee transfer amount will be $1.39 billion if all increases go into effect.

» adjust any benefit changes when reclassifying employees from exempt to non-exempt status (if applicable);

» meet with affected individual employees to discuss the pay changes and sign forms etc.;

» implement changes to the handbook; distribute a new handbook acknowledgment to ensure all employees have read the updates; document and file updated acknowledgment receipts for each employee;

» distribute communications of all the changes to employees;

» train newly classified non-exempt employees on time tracking tools and procedures

» Also, all of these do not include larger changes such as the employer’s choice to stop teleworker programs completely.  This on its own will take time and careful attention so the employer does not lose valuable productive teleworker employees.

…but they will have no problem completing all of this within an hour (according to the DOL).

Assuming your business has more than two employees, I think it may take more than 59 minutes to complete these tasks?

My advice to all employers is do not down play this action.  Yes, it is possible to complete all of these tasks, especially if you have an awesome HR department. But the DOL is underplaying the amount of time and attention that the changes will cause to your organization.  For companies that do not take the time and attention, they may become expose to wage and hour offenses.

Creating Job Descriptions

II. FLSA and THE PROPOSED CHANGES in a NUTSHELL:

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments.  If you are not sure if your business or your employees are covered by the FLSA, the DOL’s website has an elaw advisor that walks you through questions.  Your business may not be covered by the FLSA, but your employees may be covered.  Always request legal advice if you are not sure about your status. (Non-Profits and Churches usually think they are not covered by the Act, but they usually are mistaken.) 

2 key terms when discussing FLSA Classifications and OT:

Exempt: Employees primarily performing work that is exempt from or not subject to overtime provisions of the Fair Labor Standards Act (FLSA). Overtime pay is not required under FLSA.

Non-exempt: Employees primarily performing work that is subject to the overtime provisions of the Fair Labor Standards Act (FLSA). Overtime pay is required.

Proposed Changes to the FLSA:  These are basically the proposed changes that have been discussed, but we are waiting on updates:

〉〉〉 Increase salary level tests for the executive, administrative and professional exemptions to between a minimum of $47,000 and $50,440 with possible inflation triggers to increase each year. (Minimum is currently $23,660/yr)

〉〉〉 May or may not add more duties to the duties test

〉〉〉 Highly Compensated employee exemption is proposed to go up from $100,000/yr to $122,148/yr

NOTE that Computer, Sales, licensed professionals and retail employee exemptions are supposedly not affected by the changes.

New FLSA Rule Released: What’s Next?

III.  HOW YOUR BUSINESS CAN PREPARE:

  1. Be sure that all employees are properly classified. Audit all employees and review all that may be affected by the change.  Be sure to use the same procedure to document all employee changes, notes, adjustments in the same manner to avoid discrimination.
  2. Strategize on employer options and course of action: each employer will handle this differently.   Some will stop certain programs (like teleworker), while others will bump up salaries to meet the new minimum salary requirement.  Also consider if benefits will change for employees being reclassified from exempt to non-exempt.
  3. Change applicable policies and inform all employees of the handbook and policy changes (if applicable-teleworking policy for example).  This would also be a good time to update the company’s time/hour tracking policies if needed.  Obtain acknowledgment receipts for documentation purposes
  4. Communicate:  Prepare letters or schedule individual meetings to discuss changes with employees.  The sample letter below may help.  Please note:  If you have many affected employees, you may want to consider this.  Before sending this letter to any employee, the company/Human Resources may want to release a separate company-wide letter explaining the general changes to the Fair Labor Standards Act.  Most employees are not as aware of these topics as HR Professionals may be.
  5. Be available and prepared to answer questions. Provide a place to discuss issues with Human Resources if needed.   Provide time and attendance tracking training and procedures for any employee who has been reclassified as non-exempt.  A scheduling system may also be needed depending on the number of employees and business needs.

**As with any Federal Regulation, we must make sure that STATE LAWS are followed and do not conflict with Federal Requirements: https://www.dol.gov/whd/state/state.htm

BONUS TOOL:

SAMPLE COMMUNICATION TO EMPLOYEES WHO WILL CHANGE STATUS TO NON-EXEMPT

Dear (Employee Name),

Following the Fair Labor Standards Act’s regulatory changes to exemption status, (Company Name) has conducted an audit of all positions within our organization, which included a review of job descriptions as well as interviews with all supervisors and managers.  We have found that your duties no longer meet the criteria of an exempt employee.

Therefore, effective 00/00/0000 your position will be reclassified as nonexempt, and you will now be eligible for overtime for any hours worked over 40 in a workweek, subject to our usual procedures for approval of overtime. Other policies you need to be aware of are (insert any policies that may cause a change in benefits or employment practices for employees due to their reclassification).

Should you have any questions about this change, please do not hesitate to contact me.

Human Resources Manager

Overtime Changes Affect 7.4 Million Businesses. We will be emailing the updated regulations as they become available.  Sign up below for our email updates to get this email in your inbox. 

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